Happy New Year! We're overbought below resistance.
As I sit here tonight I'm fighting a nasty cold that has me feeling like nine miles of bad road. I've been feeling really lousy since Tuesday afternoon. Not a great way to start the new year, but I guess I'll just have to fight through it.
It's still too soon to know for sure which direction the market will break out towards first, but the upside definitely has the advantage. If the market does start the new year with a bang upwards above 920 I don't believe it'll hold. The market is very overbought and a lot of the indicators I follow indicate too much bullishness and complacency. As a result any immediate move up I would expect to fail.
That could lead to the fake out I mentioned in my last blog. A break above 920 that fails to hold will bring out lots of sell orders. I'm not saying that 850 would then fail, but it would probably get tested. If that unfolds it'll have to be watched closely to determine what happens next.
It's also possible that the first break of 920 will fail miserably but then setup the real breakout higher. Watch carefully for that.
There's a lot of people who want to see this thing go higher to start the new year. There's also lots of bears who think it's impossible. They have their heels dug in. They may get "taken behind the woodshed" as we say in the South. We'll see.
As we enter 2009, there are two major camps at work.....deflationists and inflationists. One side will gain the upper hand at some point this year. The deflation camp, which I've been a part of, got it right in 2008. But the inflation camp has every central bank on the planet on their side. So far it hasn't mattered. The question is will it matter and if so, when? You have to get this right in 2009 to stay ahead in this game.
You need to start thinking about your money differently, in terms of "value", not in the normal way you're used to..." by the sheer number of dollars I have". Begin to repeat to yourself "it's all about what my dollars will buy, not how many I have". This will be very apparent if the inflationists win. The value of your dollars will evaporate right before your very eyes. In 2008, anyone who stayed even gained tremendous "value" in their dollars. Their purchasing power went up, yet most are unaware of this phenomenon.
Can the central banks of the world reverse deflation? If they mean reverse it by stimulating aggregate demand, the answer is no. If they mean reverse it by collapsing the value of the dollar thereby creating a positive "mathematical" rate of inflation, the answer is maybe. That's what this grand experiment is going to tell us. It's going to be an interesting year. I hope you're ready.
It's still too soon to know for sure which direction the market will break out towards first, but the upside definitely has the advantage. If the market does start the new year with a bang upwards above 920 I don't believe it'll hold. The market is very overbought and a lot of the indicators I follow indicate too much bullishness and complacency. As a result any immediate move up I would expect to fail.
That could lead to the fake out I mentioned in my last blog. A break above 920 that fails to hold will bring out lots of sell orders. I'm not saying that 850 would then fail, but it would probably get tested. If that unfolds it'll have to be watched closely to determine what happens next.
It's also possible that the first break of 920 will fail miserably but then setup the real breakout higher. Watch carefully for that.
There's a lot of people who want to see this thing go higher to start the new year. There's also lots of bears who think it's impossible. They have their heels dug in. They may get "taken behind the woodshed" as we say in the South. We'll see.
As we enter 2009, there are two major camps at work.....deflationists and inflationists. One side will gain the upper hand at some point this year. The deflation camp, which I've been a part of, got it right in 2008. But the inflation camp has every central bank on the planet on their side. So far it hasn't mattered. The question is will it matter and if so, when? You have to get this right in 2009 to stay ahead in this game.
You need to start thinking about your money differently, in terms of "value", not in the normal way you're used to..." by the sheer number of dollars I have". Begin to repeat to yourself "it's all about what my dollars will buy, not how many I have". This will be very apparent if the inflationists win. The value of your dollars will evaporate right before your very eyes. In 2008, anyone who stayed even gained tremendous "value" in their dollars. Their purchasing power went up, yet most are unaware of this phenomenon.
Can the central banks of the world reverse deflation? If they mean reverse it by stimulating aggregate demand, the answer is no. If they mean reverse it by collapsing the value of the dollar thereby creating a positive "mathematical" rate of inflation, the answer is maybe. That's what this grand experiment is going to tell us. It's going to be an interesting year. I hope you're ready.
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